I tackled it a little different.
To figure out how to destroy it, they turned to Brodert in town (Who they have good relations with), and he figured out how to do it. However, It took him two to three days to figure this out, via a trip to Magnimar and visiting his old buddies in the archives there to do so. Magically, these two to three days was about the length of the time it took the party to tackle Thistletop. =)
For the holy water, I created a level 3 spell called Mass Bless Water. All it was is Bless Water, just can do gallons of water instead one flask. They bought a scroll of it, and then the cleric filled the Runewell with create water, and cast the scroll on it. I found this to be simpler solution.